10 celebrity charities: From four-stars to flops

By Nicholas Duva, special to CNBC.com

The highs and lows in celebrity giving

This 1985 file photo shows Lionel Richie, clockwise from left, Daryl Hall, Quincy Jones, Paul Simon and Stevie Wonder record "We Are The World" by USA for Africa.
AP

Celebrities and charity. It's a hot topic for both good and bad reasons—on the part of celebrities and the public. Some celebrities just can't get enough of themselves, and some Americans just can't get enough of seeing celebrities dragged through the mud.

But when it comes to celebrities trying to do good, the results are actually all over the map, according to Ken Berger, the president and CEO of Charity Navigator, a watchdog organization that has developed a scoring system to rate charities on their governance and financial performance to better help the public invest in not just the right causes but well-run advocates.

"There are really outstanding and passionate celebrities that give their all for a cause they care about and give personal time, money and really are voices for the organization, but at the other end of the spectrum, it's a debacle," Berger said.

You can learn a lot about how to identify well-run charities through a quick review of the highs and lows in recent celebrity efforts to lead with their hearts.

Here are 10 celebrity charities that run the gamut, from four-stars (Charity Navigator's highest score) to complete flops. Below its lowest score of zero, there are some philanthropies that Charity Navigator simply stops rating.

—By Nicholas Duva, special to CNBC.com
Posted 19 December 2014

Madonna

Madonna sits among Malawian children at the Mkoko Primary School, one of the schools Madonna's Raising Malawi organization has built jointly with US organization BuildOn, in Central Malawi, November 30, 2014.
Amos Gumulira | AFP | Getty Images

Singer Madonna is well known, among other things, for her devotion to philanthropy and the Kabbalah esoteric discipline. She managed to combine the two by creating Raising Malawi, a charitable organization that sought to ameliorate widespread poverty in the eponymous landlocked African country.

The charity's initial grand plans have been perpetually scaled back, with plans for a $15 million academy for girls scuttled amidst expenditures in the millions. A 2013 statement issued by former President Joyce Banda's office—which Banda was supposedly "incandescent with anger" over—accused the singer of wanting Malawi "to be forever chained to the obligation of gratitude. "

Charity Navigator stopped rating Madonna's Raising Malawi charity and currently has a donor advisory posted on its site detailing some of the issues, though it takes no position on allegations published.

Berger said for celebrities, or anyone starting a charity, being well-intentioned doesn't mean the person has a clue how to implement best practices. And one best practice where many celebrities fail is having a truly independent team of skilled people to lead the organization. "If you just have your friends, and if you have less than five board members, there is a tremendous danger of lack of oversight and independence of the board," Berger said.

Lady Gaga

Lady Gaga performs in an exclusive performance celebrating her Born This Way Foundation, March 13, 2014 in Austin, Texas.
Kevin Mazur | WireImage | Getty Images

Is the current era's Madonna doing any better?

Lady Gaga's Born This Way Foundation was created in 2011 in order to promote "a more accepting society, where differences are embraced and individuality is celebrated. "

Out of its total finances—$2.1 million net assets and $2.6 million in donations—the foundation spent $406,552 on "legal," $150,000 on "philanthropic consulting," $300,000 on "strategic consulting" and $808,661 on "other."

In response to the publication of these finances, Gaga's mother, Cynthia Germanotta, responded that "we are not a grant-maker that funds the work of other charities, and were never intended to be."

Berger said a celebrity being young is not a reason to raise a red flag, but it's always wise to be cautious with a charitable organization that itself is young. Being a new charity cuts both ways. Berger said spending a lot in the early years of a charity isn't surprising, since that can be required to construct an effective organization. There's no set ratio for the right amount to spend on infrastructure, as a charity is being built from the ground up, Berger said. But any charity that is less than five years can't get a rating from Charity Navigator.

Elton John

Founder Sir Elton John performs onstage at the Elton John AIDS Foundation's 13th Annual An Enduring Vision Benefit at Cipriani Wall Street on October 28, 2014 in New York City.
Getty Images

Charity Navigator rates most charitable foundations on two major metrics: financial performance, which includes the percent of a charity's budget actually spent on the programs and services it delivers, and transparency.

The Elton John AIDS foundation received a perfect score in transparency and a near-perfect score for its financials, earning a designation from Charity Navigator as one of the best-run charities.

Elton John himself has done much to further the cause, becoming one of the worldwide faces of the fight against AIDS. Among other things, the foundation runs one of the most well-attended Academy Awards parties. Rocker Steven Tyler, explaining why he donated a stay at his Hawaii mansion to the party's silent auction, said that "AIDS is a terrible disease, and I just love Elton so much that once you put those two together … I thought I'd love to come to the party and be a piece of it."

Berger said other standouts among celebrity charities are the Michael J. Fox Foundation for Parkinson's Research, which receives four stars, and Water.org, affiliated with Matt Damon.

President Jimmy Carter

Former US president Jimmy Carter sets his headphone during a Carter Center press conference in Cairo, January, 2012.
Amro Maraghi | AFP | Getty Images

Jimmy Carter was duly denied reelection to the presidency by Ronald Reagan in 1980. Two years later he and his wife Rosalynn founded the Carter Center, which sought to promote human rights worldwide.

Twenty years after that, Carter won the Nobel Peace Prize for his work through the Carter Center, which is also one of Charity Navigator's highest-rated charities (in terms of financial performance and transparency).

The breadth and depth of the funding that the Carter Center has received is intricately connected with the immense public stature that only a former president can provide. For example, although it attracted much criticism, in 1993 the late King Fahd of Saudi Arabia donated $7.6 million to Carter's organization.


Wyclef Jean

Wyclef Jean performing
Getty Images

Former member of the Fugees, Wyclef Jean founded Yéle Haiti in 2005 on the heels of Hurricane Jeanne, which had a particularly strong impact on the impoverished island nation.

It filed tax forms for 2005, 2006 and 2007 in August 2009. Charity Navigator called such a move odd and "beyond late." Scrutiny ramped up after the charity became one of the larger funds of donations concerning the 2010 Haiti earthquake; its assets rose sharply from $37,000 as millions were donated via text and other sources.

In 2010, out of the $9 million Yéle spent, about half went to travel, salaries, consulting fees and office expenses, compared to 10 percent for actor Sean Penn's charity. Among some of Yéle's payments were a $630,000 contract to Jean's brother-in-law for three projects, two of which were never built, and a $100,000 fee to Jean himself to perform at a Yéle fundraiser in Monaco. The charity shuttered its doors in 2012.

Berger said disaster situations, in and of themselves, are a charity red flag. Donors need to be aware of brand-new organizations that are created as a result of disasters, because that's exactly when you want a more established organization with a track record, not a brand-new group taking in lots of money before it even has a mature structure.

"The scammers and unethical people know there will be tens of millions going to charity in these cases," Berger said. "I'm not saying it was unethical, but you saw lots of money going to his own personal transportation and needs and lodging, expensive undertakings, not following best practices."

Charity Navigator notes in the donor advisory on its site that even though the charity seems closed to all intents and purposes, it was still accepting donations as recently as April 2014.

Kanye West

Kanye West before the Kanye West Foundation reception and benefit concert at the Chicago Theatre in Chicago, June 11, 2009.
Raymond Boyd | Michael Ochs Archives | Getty Images

The Kanye West Foundation's original goal was to reduce high school dropout rates, following a longheld wish of the rapper's late mother.

The foundation was generally not financed by West himself, relying primarily on raising funds from companies and individuals with whom the rapper worked throughout the years.

It closed in 2011 after three successive years of declining contributions and grants paid; though the foundation raised $1.09 million and spent $1.38 million from 2008 to 2010, it spent only $7,112 on grants and contributions in 2008, $583 in 2009 and nothing at all in 2010. Most expenses went to wages and other overhead-type expenses.

Berger said that Charity Navigator called out Kanye much like Kanye once famously called out President George Bush, though in Kanye's case it was not for bad politics but for the usual bad things that ineffective charities do, such as "spending more on itself than projects," Berger said.

Berger added that a typical issue with celebrity charities is a somewhat cavalier attitude that can be summed up as "my business, my money." But it's important to know that's a falsehood.

"Every taxpayer subsidizes the nonprofit sector. You can't have a tax-free organization and say it's your money; that's just wrong," Berger said. "The rest of society is trusting you to provide a public benefit."

Lance Armstrong

Lance Armstrong waits at the starting line during his Team Livestrong Challenge bike ride on October 15, 2011 in Dripping Springs, Texas.
Gary Miller | FilmMagic | Getty Images

Many fledgling charities rely on big names to garner attention and recognition from the wider community.

But what if the big name goes overnight from universally respected to reviled? The Livestrong Foundation, the cancer awareness charity founded in 1997 by former biking star Lance Armstrong, abruptly changed its name from the Lance Armstrong Foundation in 2012 after Armstrong's doping history came to surface.

That change wasn't enough to prevent a seemingly inevitable decline in donations. Donations in 2013 dropped 34 percent from 2012 to 2013, with total revenue falling 38 percent after commercial sponsorships were cut or not renewed.

Not surprisingly, this is one of the biggest dangers for any celebrity charity: being too closely aligned with an individual whose personal integrity could doom the charity. It's a celebrity charity, high risk–high reward catch-22: A large part of the appeal and effectiveness of a celebrity charity is attracting public interest through trust in the celebrity.

About Armstrong's charity, "It has suffered less after changing its name," Berger said, but the key metric for Charity Navigator is the organization's financial health, and Livestrong has suffered financially, and now it is having to make tough decisions on reducing services and the amount of work it can do. It still receives a three-star rating from Berger's organization.

Lamar Odom

Lamar Odom at a Cathy's Kids Foundation event
Getty Images

ESPN's investigative unit "Outside the Lines" reported last year, partially based on Charity Navigator data, that 74 percent of athlete-led nonprofits fell short of a number of generally accepted nonprofit operating standards.

One of the most striking examples—though by no means a long example—was Cathy's Kids, a charity founded and led by former NBA star Lamar Odom. Named after Odom's late mother, the charity ostensibly sought to raise money for cancer research; instead, out of the $2.2 million raised by the charity, $1.3 million went to finance two AAU basketball teams.

Outside the Lines also concluded that Cathy's Kids "never gave any grant money to cancer-related causes. "

Charity Navigator does not have any single data point to conclude celebrity charities perform either better or worse, on average, than the charity sector overall, but Berger told "Outside the Lines" when it published its expose that "It's critical that when these kind of opportunities are available that the celebrities involved realize the profound responsibility that they have to try to get as much money to support these worthy causes as they can and to make sure they don't damage the public trust. ... They can have a tremendous positive influence rather than doing so-so or average, rather than like everybody else."

Oprah Winfrey

Oprah Winfrey poses with graduates at the inaugural graduation of the Oprah Winfrey Leadership Academy for Girls on January 14, 2012 in Henley on Klip, South Africa.
Getty Images

Oprah Winfrey opened the Oprah Winfrey Leadership Academy for Girls in 2007. Operating in Henley on Klip, a town near Johannesburg in South Africa, the academy is a girls-only boarding school that provides a strong education to otherwise disadvantaged girls.

Though the school has undoubtedly done much good, sending its first class to university in 2012, its affiliation with Winfrey has led to the magnification of certain shortfalls. It garnered criticism for being too "limited" and "extravagant" upon its opening; an alleged physical and abuse scandal regarding an academy staffer made international press in 2007.

Celebrity-started organizations are sometimes subject to a considerably larger amount of scrutiny. Winfrey's academy will likely operate in the media spotlight for the foreseeable future. Berger said the only, and best, protection for a celebrity charity to mitigate the risk of a "wild card" scenario that generates negative headlines is to ensure the proper governance and best practices, including independent oversight, is in place.

Jerry Lewis

Entertainer Jerry Lewis speaks during the 44th annual Labor Day Telethon to benefit the Muscular Dystrophy Association at the South Point Hotel & Casino September 6, 2009 in Las Vegas.
Getty Images

In the end, the safest route for a celebrity involved with a big charity is for them to be engaged only as the front person. "What Matt Damon has approached with Water.org is pretty exceptional," Berger said. "It doesn't have his name, but he is dedicated very much to it."

When it comes to that approach, the indefatigable "dean" of celebrity charity dates back to the 1950s, when Jerry Lewis began running the Jerry Lewis Thanksgiving Party for MDA, the Muscular Dystrophy Association, an organization that seeks to fund research and education about nervous and muscular system diseases. That effort turned into a telethon in 1966, and that telethon turned into an annual tradition, hosted by Lewis every Sunday of Labor Day weekend until 2010.

By the time the 2009 telethon ended, a total of $60,481,231 had been garnered by the event since its inception. Jerry Lewis never took a cent for his advocacy but doubtlessly became an even more famous figure because of it. Lewis doubtlessly acted out of his own goodwill, creating a win-win for both Lewis and the MDA.

But Jerry may need to hit the airwaves again: MDA only receives a two-star rating from Charity Navigator. The similarly-focused Boomer Esiason Foundation is more highly recommended. While MDA scores well on accountability and transparency metrics, on the financial side it underperforms peers, specifically on the metrics that look at financial stability. Growth is on the decline (Charity Navigator looks for growth beyond the rate of inflation).

"Charities don't exist in a vacuum. Their costs (insurance, salaries, supplies and so on) increase each year. And if they're not growing at the rate of inflation, then they're actually shrinking (cutting staff and/or programs), and we think that's a risk factor donors should consider," said Charity Navigator CFO Sandra Miniutti.

You could say it's on the trajectory of a once-Hollywood darling become a fading star.

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